Selling deep ITM calls @ parity as alternate to short stock

Quote from newwurldmn:

Unless you work at a large bank, you really can't avoid the cost of borrow.
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That's not my point. I am stating that if you can't find a reasonable vig on the short then simply stay away. GRPN was an easy synthetic at $0.40 under shares out to March with long shares at 24.00 (sshort at 23.60).
 
Thanks guys for the explanation. Been awhile since I have been thinking about trades like this. If it did work, yes I could see how it's not that bad. Same delta correlation to underlying & no theta burn to worry about. But, easily assigned. No free lunch expression applies here. Markets adjust accordingly.

Yes, he said he was a local back in the 90's. Might have worked then. He also was talking about synthetics & conversions/reversals where back then you were rebated on the stock leg. He mentioned today it's the other way around.

Thanks again.
 
Just did reread. Atticus, when ur saying just run the synthetic. Ur saying just
Get long the put/short the call ATM as opposed to this Short deep ITM call business?
 
Quote from J-Law:

Just did reread. Atticus, when ur saying just run the synthetic. Ur saying just
Get long the put/short the call ATM as opposed to this Short deep ITM call business?
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Reread the first paragraph. That is what Atticus meant. That's why selling a DITM call for parity won't work because it doesn't factor in the cost to borrow. Run the ATM syn. numbers to see.

Think of the other side of the trade. Long ITM call @ 1.00 delta, short 100s HTB (assuming hedged). Why would they hold that position any longer than they had to? Exercise it. Likely free money for them because call sold below parity.
 
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